* Dollar up versus most currencies on safety buying
* U.S. $30 bln commitment to AIG adds to concern about banks
* Yen gains against dollar and euro on exporter hedging
By Satomi Noguchi
TOKYO, March 2 (Reuters) - The dollar rose against most other
currencies on Monday after sources said the U.S. government would
pour a further $30 billion into embattled insurer American
International Group <AIG.N>, fuelling safety buying of the
greenback.
The AIG move follows a new rescue plan for Citigroup <C.N>,
adding to fears that more financial firms may need similar rescue
plans, analysts said. Stock markets in Asia fell on concern about
the financial sector, while safe-haven U.S. Treasuries rose.
Some said the dollar looked relatively less risky than other
major currencies as U.S. authorities were seen to be taking swift
action to overcome the crisis in the financial system.
The yen was among the few to climb against the dollar as the
currency's sharp rebound late last week from a steep slide
worried Japanese exporters and prompted them to sell dollars
early to hedge their overseas earnings.
"The market has become increasingly concerned that the need
for rescues is broadening to other major U.S. banks after
Citigroup and AIG," said Kengo Suzuki, a currency strategist for
Shinko Securities.
AIG's board approved a new rescue package on Sunday that
includes more lenient terms on an existing government investment
in its preferred shares and a lower interest rate on a government
credit line, sources familiar with the matter said.
[]
Details will be announced around 1100 GMT, when AIG is
expected to report a fourth-quarter loss of about $60 billion.
The euro fell 0.3 percent to $1.2584 <EUR=>, and lost 0.5
percent against the yen to 122.72 yen <EURJPY=R>, according to
Reuters dealing system.
Traders said the euro came under pressure after European
leaders rejected a mass bailout of central and eastern European
countries on Sunday, clouding the outlook for the euro zone,
already hit hard by the fast-deteriorating east European
economies. []
The dollar rose to its highest in three years against a
basket of currencies <.DXY>, adding to gains made late last week
on safe-haven buying after the U.S. government said it would
raise its equity stake in Citigroup and data showed the U.S.
economy had its deepest contraction since 1982. []
The dollar edged down 0.3 percent to 97.44 yen <JPY=> in
choppy trade in which it fell as low as 96.94 yen on Reuters
dealing system, but rebounded quickly to pare losses.
The New Zealand dollar fell to a six-year low as a gloomy
economic outlook and weak share prices saw investors turn more
risk averse. The kiwi was down 1.3 percent at $0.4945 <NZD=D4>
after falling as low as $0.4913, the lowest since November 2002.
The Australian dollar slid to its lowest in a month after
gloomy data increased the likelihood the economy contracted in
the fourth-quarter. The Aussie was down 0.6 percent at $0.6348
<AUD=D4> after hitting the day's low of $0.6295.
YEN TO TRADE IN A RANGE
Analysts said the yen was likely to be range-bound versus the
dollar after hitting a 3-1/2-mth low of 98.72 yen last week, as
the market focus this week will be more on economic data and
central banks' interest rate decisions.
"The dollar looks to trade firmly against the yen this week
although it may face sporadic selling by traders making position
adjustments," said Yuichiro Nakamura, a trader for Shinkin
Central Bank.
The yen has fallen nearly 11 percent against the dollar since
hitting a 13-year high of 87.10 yen in January, with the slide
steepening after poor GDP numbers and the resignation of the
finance minister after he was forced to deny being drunk at a G7
meeting last month.
While the health of the global financial system and stock
market downturn will be of most market interest, investors will
watch U.S data closely, including Monday's U.S. manufacturing
index from the Institute for Supply Management and jobs data
later this week for more clues on the depth of the recession.
Rate decisions by the Reserve Bank of Australia and the Bank
of Canada on Tuesday and the Bank of England and the European
Central Bank on Thursday will be another market focus.
(Editing by Michael Watson)
